Catch-Up Contribution Madness

Thinking about your retirement? Recent legislation made catch-up contributions for retirement savings even sweeter, albeit even more confusing!

Catch-up contributions typically begin at age 50 (or at age 55 in one case), and the amounts vary widely depending on the type of account to which you are contributing.

IRAs, Roth IRAs, and Health Savings Accounts (HSAs)

Catch-up contribution rules for IRAs and Roth IRAs are straightforward and have remained consistent in recent years. Starting at age 50, individuals are eligible to contribute an additional $1,000 beyond the standard limit. HSAs, on the other hand, allow catch-up contributions beginning at age 55. The catch-up contribution amount here is $1,000, as well.

A fun fact – the maximum household HSA contribution amount for a couple or family HSA plan is $8,550 in 2025. If both spouses are aged 55+, each spouse can make a $1,000 catch-up contribution to their respective HSA, bringing total household contributions to $10,550.

HSA contributions reduce taxable income, grow tax-free, and are distributed tax-free for qualified medical expenses. This triple tax benefit makes age 55+ catch-up contributions a total no-brainer!

401(k)s, 457s, and 403(b)s

Like IRAs, catch-up contributions for 401(k), 457, and 403(b) accounts begin at age 50. The amount of the catch-up contribution changes at certain ages. To add to the confusion, catch-up contributions for some employees can be made on a pre-tax basis, while some contributions must be made on an after-tax basis. Yikes!

Let’s start with the various contribution amounts based on age, first:

• Age 50 – 59: $7,500 catch-up contribution limit in 2025
• Ages 60 – 63: $11,250 catch-up contribution limit in 2025
• Ages 64+: $7,500 catch-up contribution limit in 2025

Starting in 2026, the type of contribution an employee is eligible to make will depend on his/her wages for the prior year. An employee who earns $145,000 or more in gross income is required to make after-tax catch-up contributions to a Roth 401(k). Employees earning less than $145,000 can make pre-tax or after-tax Roth 401(k) contributions. The $145,000 gross income threshold will be adjusted for inflation moving forward.

SIMPLE IRAs

Now, onto the final puzzle. For those employees with SIMPLE IRA plans, contribution limits (regular limits and catch-up limits) are dependent on the number of employees at your company.

SIMPLE IRA Contribution Limits (greater than 25 employees)

• Employee contribution limit: $16,500 in 2025
• Age 50 – 59 & 64+ catch-up contribution limit: $3,500 or $3,850 in 2025, depending on employer contribution election
• Age 60 – 63 catch-up contribution limit: $5,250 in 2025

SIMPLE IRA Contribution Limits (25 or fewer employees)

• Employee contribution limit: $17,600 in 2025, although the actual contribution limit is plan-dependent
• Age 50 – 59 & 64+ catch-up contribution limit: $3,850 in 2025
• Age 60 – 63 catch-up contribution limit: $5,250 in 2025

Make sure to request your plan-specific contribution guidelines from your employer or human resources department at the beginning of each plan year if the rules seem unclear.

Should You Make Catch-Up Contributions?

If you can fit catch-up contributions into your budget without taking on unnecessary debt, then absolutely! Primarily, catch-up contributions pad retirement accounts with extra funds in the final stretch towards retirement. Pre-tax contributions can help save on taxes in higher-income years before retirement, and Roth contributions help build up an ever-so-important tax-free bucket of money.

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